Securities

12 Months Ended

Dec. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Securities

Note 2 – Securities

Available-for-sale and held-to-maturity securities have been classified in the consolidated balance sheets according to management’s intent on December 31, 2023, and 2022. The amortized cost of such securities and their approximate fair values were as follows (dollars in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale, December 31, 2023
Mortgage-backed securities	$	36,829	$	—	$	(4,362	)	$	32,467
U.S. Treasuries		3,069		—		(277	)		2,792
U.S. government agencies		287		—		(17	)		270
Municipal obligations		22,921		—		(2,593	)		20,328
Corporate debt		1,000		—		(167	)		833
Total	$	64,106	$	—	$	(7,416	)	$	56,690

	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-maturity, December 31, 2023
Corporate debt	$	5,799		$	—	$	(692	)	$	5,107
Total	$	5,799		$	—	$	(692	)	$	5,107
Allowance for Credit Losses	$	(115	)
Net carrying value of HTM securities	$	5,684

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale, December 31, 2022
Mortgage-backed securities	$	39,709	$	—	$	(5,177	)	$	34,532
U.S. Treasuries		3,083		—		(366	)		2,717
U.S. government agencies		396		—		(26	)		370
Municipal obligations		23,500		—		(3,349	)		20,151
Corporate debt		1,000		—		(188	)		812
Total	$	67,688	$	—	$	(9,106	)	$	58,582

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held-to-maturity, December 31, 2022
Corporate debt	$	5,832	$	9	$	(409	)	$	5,432
Total	$	5,832	$	9	$	(409	)	$	5,432

There was no allowance for credit losses related to available for sale securities as of December 31, 2023.

Securities with unrealized losses on December 31, 2023, and 2022, that have not been recognized in income are as follows (dollars in thousands):

	Continued Unrealized Loss for Less than 12 Months				Continued Unrealized Loss for 12 Months or More					Total
Description of securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Available-for-sale, December 31, 2023
Mortgage-backed securities	$	—	$	—	$	30,462	$	(4,362	)	$	30,462	$	(4,362	)
U.S. Treasuries		—		—		2,792		(277	)		2,792		(277	)
U.S. government agencies		—		—		270		(17	)		270		(17	)
Municipal obligations		—		—		20,328		(2,593	)		20,328		(2,593	)
Corporate debt		—		—		833		(167	)		833		(167	)
Total temporarily impaired	$	—	$	—	$	54,685	$	(7,416	)	$	54,685	$	(7,416	)

Held to Maturity December 31, 2023
Corporate debt	$	904	$	(96	)	$	4,203	$	(596	)	5,107	(692	)
Total temporarily impaired	$	904	$	(96	)	$	4,203	$	(596	)	5,107	(692	)

	Continued Unrealized Loss for Less than 12 Months					Continued Unrealized Loss for 12 Months or More					Total
Description of securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Available-for-sale, December 31, 2022
Mortgage-backed securities	$	21,377	$	(2,080	)	$	13,155	$	(3,097	)	$	34,532	$	(5,177	)
U.S. Treasuries		—		—			2,717		(366	)		2,717		(366	)
U.S. government agencies		171		(10	)		199		(16	)		370		(26	)
Municipal obligations		12,547		(1,698	)		7,104		(1,651	)		19,651		(3,349	)
Corporate debt		—		—			812		(188	)		812		(188	)
Total temporarily impaired	$	34,095	$	(3,788	)	$	23,987	$	(5,318	)	$	58,082	$	(9,106	)

Held to Maturity December 31, 2022
Corporate debt	$	2,615	$	(202	)	$	1,793	$	(207	)	4,408	(409	)
Total temporarily impaired	$	2,615	$	(202	)	$	1,793	$	(207	)	4,408	(409	)

Unrealized losses on U.S. Treasury bonds and U.S. Agency bonds have not been recognized through the income statement due to the bonds being backed in full by the United States government. Management has no intent to sell the securities, the Company can hold the securities to maturity, and the decline in fair value is largely due to changes in market interest rates. The fair value is expected to recover as the securities approach their maturity date.

Unrealized losses on mortgage-backed securities have not been recognized into income. At December 31, 2023, 82% of the mortgage-backed securities portfolio were issued by U.S. government sponsored entities or agencies. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not intend to sell the mortgage-backed securities, it is likely that management will not be required to sell the securities prior to their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at December 31, 2023.

The remainder of the mortgage-backed securities portfolio includes non-agency structured commercial mortgage-backed securities (CMBS) with a fair value of $5,726,000 which had unrealized losses of $642,000 at December 31, 2023. Each CMBS was rated AAA at December 31, 2023. These bonds have significant credit enhancement and have performed as agreed. Management does not intend to sell the CMBSs and it is likely that management will not be required to sell the securities prior to their anticipated recovery.

Unrealized losses on available-for-sale municipal obligation securities have not been recognized through the income statement. As of December 31, 2023, the credit rating for these securities ranges from A+ to AAA. General Obligation bonds represent 30% of the municipal bond portfolio. The remaining 70% of the portfolio consists of revenue bonds, the majority of which are essential purpose or have an insurance wrapper. Management has no intent to sell these securities and can hold the securities to maturity. The decline in fair value is largely due to changes in market interest rates and management expects the fair value to recover as the securities approach their maturity date.

Management evaluated the foregoing available-for-sale securities for potential impairment as of December 31, 2023. Based on this evaluation, including the preceding analysis summary, management has determined that the unrealized losses on available-for-sale securities are primarily attributable to increases in market interest rates and do not reflect credit losses. Accordingly, as of December 31, 2023, management concluded that an allowance for credit losses on available-for-sale securities is not necessary, as the decline in fair value is not indicative of credit losses. Management will continue to monitor the fair value of these available-for-sale securities and reassess the need for an allowance for credit losses if circumstances change substantially.

The were no sales of securities for the years ended December 31, 2023, or 2022.

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

As of December 31, 2023, the amortized cost and estimated fair value of the debt securities portfolio are shown by contractual maturity dates (dollars in thousands).

	Amortized Cost		Fair Value		Average Yield
Available-for-sale
Due in one year or less	$	805	$	794		2.11	%
Due from one to five years		9,654		8,706		1.76	%
Due from five to ten years		16,818		14,723		2.32	%
Due after ten years		—		—		—
Mortgage-backed securities		36,829		32,467		2.21	%
Total	$	64,106	$	56,690		2.17	%

	Amortized Cost		Fair Value		Average Yield
Held-to-maturity
Due in one year or less	$	—	$	—		—
Due from one to five years		—		—		—
Due from five to ten years		5,799		5,107		4.28	%
Due after ten years		—		—		—
Total	$	5,799	$	5,107		4.28	%

Securities pledged at December 31, 2023, and December 31, 2022, had a carrying amount of $43,070,000 and $8,193,000, respectively.

The Company had no investment in securities of issuers outside of the United States as of December 31, 2023, or 2022.

Allowance for Credit Losses for HTM Securities

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. The held-to-maturity investment portfolio consists solely of bank subordinated debt. Accrued interest receivable on held-to-maturity debt securities totaled $56,000 at December 31, 2023, and is excluded from the estimate of credit losses. Refer to Note 1 – Nature of Operations and Significant Accounting Policies for additional information on the Company’s methodology on estimating credit losses. The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity by major security type for the year ended December 31, 2023 (dollars in thousands):

For year ended December 31, 2023	Corporate Bonds
Allowance for credit losses:
Beginning balance	$	—
Impact of ASU 2016-13 adoption		38
Provision for credit losses		77
Securities charged -off (recoveries)		—
Total ending allowance balance		115

The Company monitors the credit quality of held-to-maturity securities on a quarterly basis. As of December 31, 2023, there were no held-to-maturity securities past due or on non-accrual.